2019 (11) TMI 647 - AT - Income Tax

Addition on account of excise duty payable to Excise department u/s 43B - no excise duty is payable and outstanding in balance sheet and all the excise duty has been paid as claimed - HELD THAT - In the reading of the provisions of the Act, the deduction on account of Excise duty is allowable only on the basis of actual payment. From the records, it can be gauged that the assessee has paid an amount of ₹ 74,32,10,400/- and claimed the same in the P L account. This fact of payment of ₹ 74,32,10,400/- has been confirmed by the Excise authorities vide letter dated 11.05.2010. The balance sheet does not reflect any outstanding payments by the assessee. Hence, the entirety of the fact, we hereby allow the payment made by the assessee on account of Excise duty as confirmed by the Excise authorities. The appeal of the assessee on this ground is allowed. Addition as per the provisions of section 40A(3) on account of cash payments - HELD THAT - Even though there is an amendment in Rule 6DD of I.T. Rules as is noted by the CIT(A), but in Section 40A(3) itself, an exception is provided on account of nature and extent of banking facilities available, consideration of business expediency and other relevant factors. It is not in dispute that assessee-company was engaged in the business of liquor trading and obtain supplies from the breweries. The amounts in question have been tabulated above showing the extent of amounts paid in cash. These payments are made to the distillers and breweries. The nature of business of assessed shown the expediency of payment of cash to meet the requirements of the suppliers for payment of Excise duty and clearing of cheques by the suppliers. The authorities below have not doubted the identity of the payee and the genuineness of the transaction in the matter. The source of payment is also not been doubted by the authorities below. Hence, we accordingly, set aside the orders of the authorities below and delete the addition made u/s 40A(3). Disallowance of Depreciation - Motor Lorry - HELD THAT - We find that the Assessing Officer and the ld. CIT (A) have disallowed the claim as the assessee could not produce any bills for allowance of such expenditure. Even before us, the assessee did not produce any evidence in support of their claim. Hence, we decline to interfere with the orders of the revenue on this ground. Appeal of the assessee on this ground is dismissed.

Summary

Issues Involved:
1. Addition on account of excise duty payable under Section 43B.
2. Addition on account of cash payments under Section 40A(3).
3. Disallowance of depreciation on motor lorry.

Detailed Analysis:

1. Addition on Account of Excise Duty Payable under Section 43B:

Facts and Arguments:
The Assessing Officer (AO) made an addition of ?15,73,450/- under Section 43B, citing that the assessee failed to reconcile a difference of ?8,47,000/- for the Galaria Market shop and ?7,26,450/- for the Nathpur vend. The AO noted that the assessee paid ?7,26,450/- only on 12.02.2013, post the financial year relevant for A.Y. 2010-11. The CIT(A) upheld the AO's decision, emphasizing that the Excise and Taxation Department confirmed the non-payment before the financial year-end.

Judgment:
The Tribunal found that the assessee had paid ?74,32,10,400/- as confirmed by the Excise authorities, and no outstanding balance was reflected in the balance sheet. Thus, the provisions of Section 43B, which allow deductions only on actual payment, were satisfied. The Tribunal allowed the appeal on this ground, acknowledging the payment made by the assessee.

2. Addition on Account of Cash Payments under Section 40A(3):

Facts and Arguments:
The AO added ?92,27,520/- under Section 40A(3) for cash payments made to three parties: M/s Skol Breweries Ltd., M/s Ashoka Distillers & Chemicals Pvt. Ltd., and M/s Allied Blenders & Distillers Pvt. Ltd. The CIT(A) confirmed this addition, stating that the assessee failed to justify the necessity of cash payments. The assessee argued that the payments were made due to business exigencies and relied on various judgments to support the claim.

Judgment:
The Tribunal noted that the percentage of cash purchases was low compared to total purchases and that the payments were made due to business exigencies and requests from the sales parties. The Tribunal referred to several judicial precedents, including the Supreme Court and various High Courts, which highlighted that genuine and bona fide transactions should not be disallowed under Section 40A(3). The Tribunal concluded that the nature of the assessee's business necessitated cash payments and that the transactions were genuine and duly recorded. Therefore, the addition under Section 40A(3) was deleted.

3. Disallowance of Depreciation on Motor Lorry:

Facts and Arguments:
The AO and CIT(A) disallowed the depreciation claim of ?71,850/- on a motor lorry, stating that the assessee failed to produce bills for the claimed expenditure. The assessee argued that the difference in cost was due to insurance and registration charges.

Judgment:
The Tribunal upheld the disallowance as the assessee did not produce any evidence to support the claim, even before the Tribunal. The appeal on this ground was dismissed.

Conclusion:
The appeal was partly allowed. The Tribunal allowed the appeal regarding the addition under Section 43B for excise duty payments and the addition under Section 40A(3) for cash payments. However, the disallowance of depreciation on the motor lorry was upheld.